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How to Use a Bridging Home Loan to Buy a House

If you've found the dream property but are still trying to sell your existing home or are waiting for funds to clear, mortgage bridging loans could help you buy straight away so you don't miss out.

However, given the large sums and the often short time scales involved property bridging finance is a specialist area and not often available on the high street.

This means it's even more important to do your research and know exactly what you're looking for before applying for finance bridging. Getting loan advice before you apply for a bridge loan to buy a house is also a sensible idea.

Here's how to find a residential bridging loan that will allow you to get the keys to your new property quickly, without paying through the nose!

What exactly do you need from your bridging loan?

Although time may be tight, before you apply for a bridging loan you need to work out exactly what you're looking for.

How much do you need to borrow?

The first step is to work out exactly how much you need to borrow using a residential bridging loan.

If the loan is for a house purchase you should decide whether you need to borrow funds to cover legal fees, surveys and other associated costs in addition to the purchase price. As with any loan it's sensible to borrow the least you can so you minimise the amount you pay out in interest and charges.

Once you have a set figure you can then compare the deals available from each of the different bridging loan specialists that match your needs.

Many bridging loan providers will limit the total amount they will lend, so if you need to borrow a large amount this will automatically rule some out. Most bridge loan companies will also set a minimum loan amount; this is to make the loan financially worthwhile for them but it's something else you need to check when considering which lender to go with.

How long will you need the residential bridge loan for?

Most bridging loans are intend to plug a short gap in funding and usually last a matter of weeks or months.

While you may not be totally sure how long you will need to borrow for, especially if you are waiting for funds to clear from a third party, or for the sale of your existing home to complete, you will need to settle on a reasonable estimate before you apply.

If you suspect that you may need a little longer to repay your bridging loan you will need to consider the cost of any extension fees and whether each residential bridging loan has a maximum lending term.

Equally if you only need to borrow for a very short period there are bridging loan lenders who offer loans over just a few days or weeks, so if this is a possibility make sure to check each lenders' minimum loan term as well.

You should extend your borrowing over the shortest term possible to keep interest costs low.

What bridging loan LTV do you need?

Bridging loans for building purchases are a type of secured borrowing; they will usually be secured against the value of the property you are looking to buy.

This means that like a mortgage, bridge loan lenders will set a maximum loan to value on all bridging finance for house purchase applications. The loan to value ratio (LTV) represents the percentage of the property value that you need to borrow.

Bridging loans of up to 75% LTV are available from most lenders; this means you'll need to fund the other 25% of the property value through some other means. Some lenders may offer a higher LTVs depending on your circumstances, but whatever the amount you need to be confident that you meet the criteria before you apply.

How much will the home equity bridging loan cost?

Given their short term nature and the large sums involved bridging loan interest rates and charges are often quite high, making them a costly way to borrow.

This means that you need to be proactive about getting the cheapest option and fully aware of the costs before you sign on the dotted line.

Our bridging loan for house sale comparison table includes a list of the most popular residential providers and an indication of the interest rates they charge.

You'll need to bear in mind that most bridging loan providers list their interest rates on a monthly basis - given the short term nature of the loans.

What are the other costs involved with bridging loans?

Aside from the monthly interest rate you may also be faced with other fees and charges when you take out a residential bridging loan.

These can include valuation costs (to check the LTV of your loan), arrangement fees and possibly early repayment charges should you want to pay off the property bridging finance early.

You'll also need to enlist the services of a solicitor to arrange the mechanics of the loan and house purchase for you. Most bridging loan lenders will require you to use your own solicitor but this would be necessary for a house purchase anyway.

To get a full quote and breakdown of the costs involved, including the additional charges and fees simply click on the apply button on our comparison table and enter your details.

About our bridging loans comparison

Q

Who do we include in this comparison?

A

We include bridging loan lenders from our broker, Mortgages Warehouse. Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here. You do not pay any extra and the deal you get is not affected.

Our website is completely free for you to use but we may receive a commission from some of the companies we feature. How our site works.

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